I love Neil Gaiman; I've read all of the Sandman graphic novels and several of his books. Not too long ago I typed in his name on youtube. I had just finished watching him read his new novel for children The Graveyard Book and I wanted to watch more video of him speaking. One of the videos available was the google author series, sort of an "Inside the Actors Studio" for writers. At one point in the interview he mentioned being at a party and some one asking him what he did for a living. He said he wrote comic books and received the usual disapproving response. Then the person asked what comics, to which he replied Sandman. Suddenly the persons demeanor changed and they said, "Oh no, you write graphic novels." Gaiman then said to the audience that he felt like he was a prostitute that was just called "a lady of the evening."
To me there is no real distinguishing characteristic that separates comic books from graphic novels a graphic novel is simply a collection or larger version of a comic book. Not all but many of the great graphic novels were originally released as comics first. Sandman, Watchmen, The killing Joke were all released in issue form before they were collected and became graphic novels.
I would suppose though, for many, the way to distinguish between comics and graphic novels would be content. Comics are often associated with superheroes in the public consciousness, so when the medium of sequential art is used to deal with different "dramatic" content many would call that a graphic novel. A comic book about Jack the Ripper is considered a graphic novel titled From Hell. Content involving a father and son, Chicago gangsters and The Great Depression is packaged as a graphic novel titled Road to Perdition. A small town coffee shop owner who used to be a psychotic mob hit man was published as a graphic novel titled A History of Violence. If you notice these are also all major motion pictures that Hollywood has classified as serious dramas not comic book movies.
Ultimately I see the comic book/graphic novel discussion as a battle of semantics. The difference to me is only in the language. A graphic novel is a term created by publishers to broaden their audience, so people who read them didn't feel lumped in with small children and socially awkward individuals. Overall though, to me, it all the same: sequential art storytelling that goes all the way back to Egypt and possibly caveman days. If you don't believe me read Scott McCloud's "graphic novel" Understanding Comics. It is universally believed to be the best source of information on understanding the art and craft of comics.